Impact of Covid-19 on Logistics and Transport Companies in India

 COVID-19 was originated in the Chinese city of Wuhan in December 2019. The impact of COVID-19 was first felt in China due to the role it plays in global manufacturing (with Wuhan, the epicentre of the pandemic, playing a particularly significant role—more than 200 Fortune Global 500 Firms have a presence there). China is also a major consumer of global commodities and agricultural products.  Soon the disease spread across the world the next month and it was declared pandemic. To tackle this new disease many countries began to implement complete lockdown for months. All the activities were suspended, the movement of the public was prohibited and schools, colleges, offices, industries, malls, etc. were ordered to shut. The lockdown affected businesses and industries of many sectors. Even top freight forwarding companies in India were adversely affected due to the shutdown of manufacturing industries. It is very true that logistics and transport companies rely on manufacturing industries and also on e-Commerce industries. This article is about the general discussion about the effects on logistics and transport companies in India in early 2020.

Logistics mainly involves the movement, storage, and flow of goods, whereas transport involves the movement of goods from one place to another. As logistics and transportation business are responsible for major contribution in the development of the nation through the economy, it also affects GDP of the country. In the very early weeks of lockdown developing countries began to witness a shrink in their GDP as there was no cross-border trade. Developing countries that export agricultural products also faced a huge loss. Other electronics industries also faced cut in their production as they have to depend on various components for final assembly that are exported from multiple countries.

India is facing several challenges amid its own country-wide lockdown: labour shortages, cargo capacity challenges, a manufacturing slowdown, order delays and stuck shipments, and demand and supply shocks. India's real gross domestic product (GDP) is at its lowest in 6 years because of the COVID-19 standstill adversely affecting consumption and investment in the Indian economy.

The manufacturing halt has reduced demand for logistics services, which likely will result in downward pressure on prices across warehousing, freight, and logistics. With countries around the world imposing lockdowns, minimal export-import movements have amplified the crisis in the logistics space.

Restriction of air travel and international flights globally has contributed to the slowdown in the movement of goods, and India's lockdown brought first- and last-mile transportation and intermodal movement of goods to a standstill.

Aviation is one of the worst-affected segments. The Indian government has suspended all passenger flights, only allowing the movement of cargo flights. Air carriers prioritize on transportation of essential cargo and critical pharma/medical equipment. Staff shortages and delays in the clearance of cargo have resulted in congestion at airports.

As the implementation of the first lockdown in India was a surprise, it was estimated that about 70 per cent of the loaded trucks were stuck somewhere on the highway for many weeks. Few trucks who were nearer to their destination somehow managed to reach the warehouse but labourers were not available to unload the goods. 50% of the organised sector and unorganized sector long haul trucking fleet of India is apparently without the workforce as there is no drivers reason being that they have gone back to their homes. The Local short-haul transport is working but with reduced capacities. Essential items that are being carried by the trucks are stuck as there is no labour to help out with the loading and unloading of the essential items. The Government had also banned the entry of ships into the port, they have to wait in the sea till their quarantine period is over affecting freight forwarding companies in India. The vehicle manufacturing industry also saw a dip in their production and overall sales as the transport industry was shut. Dependence on Railways would not suffice as it would only cause a larger gap as first mile and last mile might be a great challenge with Railways.

A reduction in vessel capacity and equipment shortages related to disruptions has had a major impact on the intra-Asia trade lanes. A large drop in freight volumes has prompted major carriers to report service cancellations and delays, and blank sailings to and from India and the Middle East, Europe, and the Mediterranean.

With the widespread outbreak of COVID-19, nations across the globe, with India being no exception, are grappling to counter the threatening impact of the pandemic on economic and regional stability. The significant implications of the coronavirus outbreak on the sustainability of businesses and employment is already evident from the negative sentiment being experienced by the economy. Some of the most evident indicators of negative sentiments include a contraction in India’s core sectors by 6.5% in March and a notable depreciation of the Indian rupee against US$. Also, the monthly unemployment rate in April has spiked to 23.5% from 8.7% in March 2020. Thousands of people working in the construction, manufacturing, logistics, and transport sectors lost their job.

Novel Coronavirus has severely hampered not only the working capital of the companies but also the cash flow of the companies. The working capital has been getting affected due to the slowdown in the payments or the deferment in payment of the older invoices. It’s a double loss for the logistics companies as the industry is facing not only an increase in the cost of operations because of the rise in costs of manpower, that is, the wages there is also expenses that are to be taken up to fulfil the guidelines of implementation of safety to fight against Covid-19.

The Internet of Things, blockchain, 3D printing, and autonomous transportation have gained renewed interest as technologies that will help companies survive and thrive during a pandemic or another crisis.

We have also recognized multimodal logistics solutions, digital integration, flexible solution models, and warehousing infrastructure as other areas that are expected to present opportunities.

In the way the “New Normal” wave is building up, India’s (or for any country’s) economy can swing in two extreme ways. It can either be pulled into a deep depression or if the potential opportunities are embraced and a well-thought-through plan of action is developed and effectively executed, then the economy can catapult to recovery and consequent development. It is widely believed that the economic consequences of the COVID-19 pandemic will far outweigh any other crisis of the past. The entire global economy has come to a standstill with the imposition of lockdown aimed at controlling the spread of the virus.

In addition, with the complete disruption in global supply chains, these countries are also beginning to look at other nations to mitigate risks. It is, therefore, crucial for India to seize the opportunities of:

1)        Positioning itself as an attractive investment destination for companies looking to shift their operations from their current geographies of operations, and  

2)      Feeding in to bridge the disrupted global value chains to emerge as a dependable exporter of diversified product and service lines.

 The central ministries and state governments are working relentlessly to resolve broken supply chains, deteriorated budgetary metrics and economic downturns. However, this is a Catch-22 situation for the governments – if the lockdown is not lifted completely, the extent of recession will be unimaginable and as the lockdown is lifted, there is a high likelihood of the fast spread of the virus. It is perhaps time that along with putting the efforts to develop a vaccine or cure for the virus, governments, as well as businesses, undertake serious industrial continuity planning.